How Michael Avenatti went from battling Trump to fighting his own legal woes

Key Points
  • Michael Avenatti, who represented porn star Stormy Daniels in her case against Donald Trump, faces two trials this year for allegedly stealing money from clients including Daniels.
  • Avenatti, who briefly considered running for president, has already been convicted of trying to extort up to $25 million from Nike. He faces more than 40 years in prison when he is sentenced next month.
  • Avenatti has denied all of the charges, which his attorney claims are politically motivated by the Trump administration.

In this article

American Greed: The flashy litigator representing Stormy Daniels in her dispute with President Donald Trump
American Greed: Flashy litigator representing Stormy Daniels in her dispute with Donald Trump

The scandal involving President Donald Trump and porn actress Stormy Daniels — who received $130,000 in hush money over an alleged 2006 sexual tryst — is likely to remain alive long after he leaves office.

Not only is Manhattan District Attorney Cyrus Vance Jr. reportedly investigating how Trump's company accounted for the payments. Daniels' former attorney, Michael Avenatti, faces two high-profile criminal trials this year over allegations he embezzled money from clients including the adult film star.

Avenatti has pleaded not guilty in both cases. He was already convicted last year of trying to extort up to $25 million from athletic apparel maker Nike, and is scheduled to be sentenced in that case next month. His attorneys claim the prosecutions are retribution from the Trump administration for his role in exposing the alleged affair and his vocal criticism of the president.

"Mr. Avenatti was targeted by Donald Trump, William Barr and Trump's Department of Justice," Avenatti attorney Daniel Steward said in an e-mail to CNBC's "American Greed."  

"Does anyone really think that politics didn't play a huge role in all of this?"

Avenatti, 49, faces up to 43 years in prison when he is sentenced in the Nike case. He could face decades more if convicted of defrauding his clients. He is on home confinement in California after briefly being held without bail at the Metropolitan Correctional Center in New York last year.

Rise and fall

Avenatti rocketed to fame in 2018, when he represented Daniels in a lawsuit seeking to invalidate a nondisclosure agreement she signed over the alleged affair — which Trump has denied — in the waning days of the 2016 presidential campaign. Avenatti became a fixture on cable news programs. He was even briefly talked about as a candidate for president.

"He became this overnight sensation, a liberal folk hero," said Daily Beast senior reporter Kate Briquelet. "I mean, people really loved Michael Avenatti for taking on the president."

But Avenatti's own alleged conduct quickly caught up with him.

In the Nike case, a federal jury in New York found that he threatened to expose purported misconduct by the company unless Nike agreed to pay him up to $25 million to investigate the situation.

"You guys know enough now to know you've got a serious problem," Avenatti said in a March 20, 2019, phone call with Nike attorneys, secretly recorded by the FBI. "A few million dollars doesn't move the needle for me."

A jury convicted him on three felony counts: attempted extortion, transmission of interstate communications with the intent to extort, and honest services wire fraud.

Daniels — whose real name is Stephanie Clifford — fired Avenatti in 2019 alleging accounting irregularities, which he denied. She also claimed that a defamation suit against Trump — in which she lost and was ordered to pay $350,000 in fees — was filed by Avenatti without her knowledge. Avenatti has called Daniels' account of events "not accurate."

"I have always been Stormy's biggest champion," he said in a statement in 2018.

Last May, federal prosecutors in New York charged Avenatti with embezzling nearly $300,000 in Daniels' proceeds from a book deal — allegations he has called "bogus." He has pleaded not guilty. That case is set for trial in April, with Daniels certain to be a star witness.

And Avenatti faces a raft of federal fraud charges for allegedly embezzling millions of dollars in settlement proceeds from five other clients in California. That case, in which Avenatti also has pleaded not guilty, is set for trial in July.

Legal lessons

"Lawyers are not allowed to lie or engage in crimes, period," Phoenix attorney Lynda Shely told "American Greed."

Shely, who advises law firms nationwide on ethics, said that if Avenatti is convicted, the trials will show that clients should pay careful attention to their relationship with their lawyer, no matter how big or small the case is.

"It's a team. You need to have two-way communication," she said. "The client needs to help with the representation by giving the lawyer the information they need, and the lawyer has a duty to let the client know what the status of the matter is, and to let the client know, 'Hey, look, I can do this, but I can't do that for you.'"

The first step in that relationship is a conversation with the attorney you are thinking of hiring. The discussion should be thorough and frank, setting reasonable goals and expectations.

"Sending a lawyer an e-mail and thinking that they're your lawyer won't work," Shely said.

Ask whether the attorney has handled cases like yours in the past. What is their level of experience? Does the firm have the resources to handle your case? How long is the case likely to take, and how frequently can you expect to hear from your lawyer? Both attorney and client need to manage expectations.

"By far the number one complaint by clients against their lawyers is, of course, lack of communication," Shely said.

Do your own homework as well. Every state has an online database where you can find out if your attorney has been disciplined.

Then, if everything checks out, get a written agreement — most states require one — spelling out the services your attorney will perform and how they will be compensated.

Complaint department

Even the best attorney-client relationship can go awry. Every state has a mechanism to file a complaint against an attorney — typically through the state agency that regulates attorneys, or your state's highest court, or the state bar association.

But the American Bar Association, which offers tips on its website on how to deal with attorney-client disputes, cautions that it is best to first try working out the issue directly with your lawyer.

"Be aware that making a complaint of this sort may punish the lawyer for misconduct, but it will probably not help you recover any money," the site says. 

In the case of fee disputes, most state bar associations offer arbitration programs. And when it comes to receiving your proceeds from a legal settlement, there are multiple layers of protection designed to put the client in control.

"Only clients can agree on a settlement," Shely said. "So, if a lawyer says, 'Hey, I settled your case,' a big red flag should be going up because lawyers can't do that. The client decides settlement, period."

Your attorney must notify you as soon as a settlement check is received, and then must deposit it into a special account from which your lawyer will pay you your proceeds and withdraw his fee. But if there is any disagreement about the lawyer's share, that amount in dispute must remain in the account until the dispute is resolved.

If the attorney is found to have stolen settlement funds, as Avenatti is accused of doing, there are built-in protections to help you get at least some of that money back.

"Every state has a fund of money, a client protection fund," Shely said, "which is literally a fund of money that is there to compensate clients who have had their lawyers steal funds from them."

The best way to prevent disputes from going that far is to keep the lines of communication open. Understand that you are not your lawyer's only client, but do not be afraid to ask questions.

"Unfortunately, sometimes even corporate clients are afraid to ask a lawyer, 'What the heck were you doing?' But the clients always entitled to ask that," Shely said.

See how star lawyer Michael Avenatti went from a national sensation to a convicted felon on the ALL NEW SEASON PREMIERE of "American Greed," Monday, January 18 at 10pm ET/PT only on CNBC.